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- Stumble upon a tariff: how much will the mutual duties of China and the United States hit their economies
Stumble upon a tariff: how much will the mutual duties of China and the United States hit their economies
The mutual duties imposed by the United States and China in March are unleashing a new stage of the trade war between the countries, but still these measures can be considered symbolic. States are probing the ground and trying to assess how far their bans can go, experts interviewed by Izvestia believe. Since March 4, American President Donald Trump has imposed additional tariffs of 10% on goods from China, while China does not significantly depend on supplies to the United States, that is, even despite the scale of duties, which is already 20%, they will not exert significant pressure. Beijing, in turn, introduced mirror measures, but only on American agricultural products. Why Trump's tariffs on Mexico and Canada are actually also an attempt to put pressure on China and whether Russia will benefit from this confrontation is in the Izvestia article.
How China reacted to Trump's tariffs
On March 4, US President Donald Trump's import duties of 25% against Mexico and Canada, as well as additional 10% surcharges against China, began to take effect. Ottawa has already promised to respond to these measures — the country's Foreign Minister Melanie Joly announced her intention to impose a tariff worth 155 billion Canadian dollars ($ 107.4 billion). Prime Minister Justin Trudeau said on Tuesday that the United States had launched a trade war with Canada. She filed a lawsuit with the WTO over the imposition of tariffs on her goods. Trump also said that if a neighboring country retaliated with duties, he would immediately increase US tariffs on Canada.
And since March 10, China has imposed import duties of 15% on American chicken, wheat, corn and cotton, as well as a 10% surcharge on soybeans, pork, beef, fruits, vegetables and dairy products. In addition, China has imposed export controls on 15 companies and declared 10 more unreliable organizations. Beijing has also filed a new lawsuit with the WTO.
The mutual duties of China and the United States are not the first round of the trade war between them. This confrontation began back in 2018, when Washington's tariffs затронули approximately 18% of all U.S. imports (2.6% of GDP), while China's retaliatory measures covered 11% of goods entering the country (3.6% of GDP).
In addition, in early February, the US president already imposed import duties against China in the amount of 10%. China reacted promptly and imposed 15% tariffs on American coal and liquefied natural gas, as well as 10% surcharges on oil and agricultural equipment, starting on February 10.
Gold prices reacted to the introduction of the new tariffs, rising by 2% to $2,937 per ounce on March 4 alone. At the same time, American indices sank (S&P500 — by 1.5%, to 5,800 points, NASDAQ — by 1%, to 20,226 points, Dow Jones — by 1%, to 42,783 points). On the contrary, the main Chinese SSE Composite index for March 4 increased slightly, rising from 3316 to 3324 p .
A new trade war
Right now, China and the United States are only probing each other's weaknesses and strengths — the measures they are using are rather symbolic, experts interviewed by Izvestia believe.
The US restrictions look quite large-scale, since they are aimed at all products, but in fact they are unlikely to cost China much. This country is trying to develop both the domestic and foreign markets, while trade within the republic is a good insurance policy for maintaining the entire Chinese economy, said Associate Professor of the Department of Economic Theory at the Russian University of Economics. Plekhanova Ekaterina Novikova.
If we talk about exports, Beijing supplies only 15% of goods to American markets — sales of products from China to the United States declined significantly during the presidency of Joe Biden.
— That is, China turned out to be the best prepared for the "war of duties", and high tariffs on the supply of its goods to the United States will not affect its economy much," said Natalia Milchakova, a leading analyst at Freedom Finance Global.
The duties on Mexico are also partly related to China, recalled the scientific director of the Russian Council on International Affairs (RIAC) Andrey Kortunov. After all, the Trump administration believes that China is moving many of its production facilities to Mexico, and thus, thanks to the basic "screwdriver" technology, Chinese exports are flooding American markets.
An additional blow to Chinese exports may be Trump's demand to third countries — for example, Mexico — to impose import duties on goods from China that are imported through these countries, agrees Olga Belenkaya, head of the macroeconomic analysis department at Finam.
China's retaliatory duties so far look moderate, the expert noted. She added that the Chinese authorities hope to reach an agreement with the Trump administration and prevent a large-scale escalation of the trade war.
View of the White House, Washington, USA
At the same time, the United States itself may suffer from the new tariffs. The introduction of duties accelerates inflation in the country (as products will become more expensive), provokes an increase in Fed rates and will lead to stagnation of the American economy, said Alexander Abramov, head of the Laboratory for the Analysis of institutions and financial markets at the Institute of Applied Economic Research of the Presidential Academy.
— Trump is now demonstrating his willingness to go far enough, despite the fact that the American consumer is suffering, and this may have inflationary consequences for the country's economy. He has repeatedly said that he would like to negotiate with Chinese President Xi Jinping on a trade agreement that would suit both sides," says Andrei Kortunov from the INF.
At the same time, a new round of trade conflicts will hardly affect Russia. A negative impact is possible only if a large-scale tariff war causes a serious slowdown in China's economic growth, while its demand for Russian commodity exports will fall and prices for them will decrease, Olga Belenkaya believes.
How Trump's duties will affect the economies of Canada and Mexico
The initial premise of the imposition of customs duties is Trump's penchant for protectionist policies aimed at increasing the competitiveness of American companies in the US domestic market, independent expert Andrei Barkhota recalled.
Washington's tariffs against Mexico City and Ottawa may limit the GDP growth of these countries and negatively affect global economic relations, believes Alexander Abramov from the Presidential Academy.
In particular, in Mexico, the sectors most likely to be affected are machinery and electronics, transport equipment and food production (vegetables, fruits and nuts), Olga Belenkaya noted. Canada is one of the main suppliers of energy resources, transportation equipment, and metals, such as aluminum, to the United States. At the same time, tariffs for energy resources are lower (10%), meaning that America still recognizes its dependence on certain categories.
Indeed, difficult times will come for Canada and Mexico, as the United States is actually the sole consumer of goods from these countries, Natalia Milchakova recalled. Neighboring countries account for about 75-80% of exports to America.
However, judging by the maneuverability and actions of the new American administration, duties do not last forever — they serve as a tool for negotiations and the establishment of a new regime of economic relations, Andrei Barkhota added. For example, increased tariffs on goods from neighboring countries may be reduced if the US budget receives some kind of "compensation" in the form of new investment contracts and agreements.
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